Household Saving Behavior Research Articles

Household Saving Behaviour in Pakistan

Household saving, which is a part of national saving, is expected to contribute to economic growth significantly. Its share in the total national savings of Pakistan, during 1960-90, was about 83 percent, ( and in gross national product it varied between 6.6 percent and 10 percent, in the early 1980s.2 This is a significantly high proportion considering the meagre total national saving ratio in Pakistan. The analysis of savings is a controversial issue. First. there is no standard empirical definition of household savings. Should consumer durables be considered a part of household saving? Should human capital be considered a part of household saving? These are important questions. Answers to these questions will be useful for the analysis of consumer preferences and for public policy. The rationale for the inclusion of consumer durables as a' part of household saving is that they are like productive assets purchased in order to provide for a flow of services. Similarly, human capital is expected to raise labour productivity and its future income and consumption. The second issue is the response of each component of saving to changes in economic and demographic factors.3 For example, jewellery and assets may respond differently to changes in economic and/or social conditions. Third, since the theoretical literature defines saving as a residual there is no standard functional form of the empirical saving function. In this paper, we estimate different functional forms to analyse savings behaviour in Pakistan.

Socio-economic Characteristics and Household Savings: An Analysis of the Households' Saving Behaviour in Pakistan

Domestic resource mobilization is one of the key determinants of sustained economic growth. Pakistan's perfonnance with regard to domestic resource mobilization has been poor despite maintaining a respectable economic growth rate. Why is the savings rate so low in Pakistan? In this paper we analyse the household savings behaviour in Pakistan, using micro level data of the Household Income and Expenditure Survey (HIES) for the year 1984-85. Three different non-linear savings functions attributed to Keynes, Klein, and Landau are estimated separately for the urban and the rural households, using the Ordinary Least Squares (OLS) technique. It is found that the average income and saving of an urban household are considerably higher than those of overall Pakistan or a rural household. However, contrary to the general belief, it is found that the propensity to save of the rural households is much higher than that of their urban counterparts. The dependency ratio and the various categories of education are found to have a negative influence on household savings. No systematic relationship is found between savings and the employment status and occupation of the household head. It is found, however, that saving increases with age but tends to decline when the age crosses a certain limit - a finding consistent with the Life Cycle Hypothesis.

Savings, Commodity Market Rationing, and the Real Rate of Interest in China

A paper that presents a theory to describe household saving behaviour in China. Outlines impact of commodity market rationing and real interest rate on savings; offers verification on the household savings behaviour relative to the use of official rate of inflation series; an attempt to disentangle supply and demand schedules.

The savings behavior of migrant workers: Turkish workers in W. Germany

This paper presents an analysis of savings behavior of Turkish households residing in W. Germany using survey data. It is found that there exists a statistically significant difference in the savings behavior of households who migrate from urban areas of Turkey and those who migrate from rural areas. The estimated savings function is non-linear with respect to household income. While education and the occupation of the head of household do not have statistically significant impacts on the savings of either group, age of the household's head has a statistically significant impact on the savings behavior of both groups.

An empirical analysis of savings behaviour of the Greek agricultural households

In this article, the author presents the results of an econometric cross-sectional analysis of determinants of the savings behavior of agricultural households in Greece. The estimates of bivariate and multivariate models indicate that: (1) the marginal propensity to save is higher than the average propensity to save and is differentiated among classes of income, wealth, age and profession, income uncertainty mostly due to climatic variations, and educational level; (2) the hypothesis that income uncertainty in Greece, as in other countries, raises the marginal propensity to save can be supported; and (3) the disposable income is the most important factor affecting agricultural savings. Copyright 1986 by Oxford University Press.

A Portfolio Model of Korean Household Saving Behavior, 1962-1976

Previous articleNext article No AccessA Portfolio Model of Korean Household Saving Behavior, 1962-1976David L. OrtmeyerDavid L. Ortmeyer Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Economic Development and Cultural Change Volume 33, Number 3Apr., 1985 Article DOIhttps://doi.org/10.1086/451480 Views: 3Total views on this site Citations: 8Citations are reported from Crossref Copyright 1985 The University of ChicagoPDF download Crossref reports the following articles citing this article:Kivilcim Metin Ozcan, Asli Gunay, Seda Ertac Determinants of private savings behaviour in Turkey, Applied Economics 35, no.1212 (Aug 2003): 1405–1416.https://doi.org/10.1080/0003684032000100373Gulnur MURADOGLU, Fatma TASKIN DIFFERENCES IN HOUSEHOLD SAVINGS BEHAVIOR: EVIDENCE FROM INDUSTRIAL AND DEVELOPING COUNTRIES, The Developing Economies 34, no.22 (Mar 2007): 138–153.https://doi.org/10.1111/j.1746-1049.1996.tb00734.xAnand Chandavarkar Saving Behaviour in the Asian-Pacific Region, Asian-Pacific Economic Literature 7, no.11 (May 1993): 9–27.https://doi.org/10.1111/j.1467-8411.1993.tb00081.xDavid Horton Smith Four Sectors or Five? Retaining the Member-Benefit Sector, Nonprofit and Voluntary Sector Quarterly 20, no.22 (Jun 2016): 137–150.https://doi.org/10.1177/089976409102000203Jang-Bong Choi, Steven L. Husted Money demand behavior of Korean households and corporations in a flow-of-funds financial model, Journal of Asian Economics 2, no.11 (Mar 1991): 69–86.https://doi.org/10.1016/1049-0078(91)90024-FSang-Woo Nam A sectoral accounting approach to national savings applied to Korea, Journal of Development Economics 33, no.11 (Jul 1990): 31–52.https://doi.org/10.1016/0304-3878(90)90004-UNathaniel H. Leff, Kazuo Sato The prospects for higher domestic savings rates in Latin America, Journal of Policy Modeling 9, no.44 (Dec 1987): 559–576.https://doi.org/10.1016/0161-8938(87)90014-7David L. Ortmeyer, Peter Fortune An application of the life-cycle linear expenditure system to the South Korean household sector, 1962–1976, Journal of Development Economics 18, no.2-32-3 (Aug 1985): 361–379.https://doi.org/10.1016/0304-3878(85)90062-8

Household Consumption and Saving Behaviour in Pakistan: An Application of the Extended Linear Expenditure System

The paper aims at developing a complete set of income and price elasticities of household consumption and saving for Pakistan by applying the Extended Linear Expenditure System (ELES) to the data of the 1979 Household Income and Expenditure Survey. Items like Rent on Housing, Furniture & Fixture, Education, Recreation, and Traveling & Transportation were found to be income-elastic as well as fairly sensitive to changes in (own) prices. As regards the cross-price effects, food prices turned out to be the most important determinant of demand for all other commodities and also of total expenditure (hence of saving). Expenditure on education is particularly affected by the rising cost of food.

Some Microeconometric Evidence Concerning the Effect of the Canada Pension Plan on Personal Saving

Growing criticism of Canada's retirement income system during the past few years has resulted in renewed pressure on both federal and provincial governments to expand public pension programmes, especially the Canada Pension Plan (CPP). Once again, this prospect has aroused fears that an unfunded expansion of the public pension system could have a seriously adverse effect on personal saving. The adverse effect on personal saving, it is argued, could in turn lower investment and thereby reduce even further what is already, by postwar standards, an extremely sluggish rate of productivity growth for the Canadian economy. However, the basis for fearing that public pensions may reduce household saving is somewhat questionable. Since the wealth replacement effect of public pensions on saving may be offset by an induced retirement effect, and perhaps by inter-generational transfers in the form of bequests, the theory at least is inconclusive in this regard.1 Surprisingly enough, unlike in the United States, where the theoretical indeterminacy concerning the overall impact of public pensions on saving has spawned a multitude of empirical studies, the subject has been largely ignored by econometricians in Canada. But sparse though the empirical evidence may be, it does not support the seemingly popular contention that public pensions reduce personal saving. In the only published empirical study to date, Boyle and Murray (1979) conclude from their analysis of time-series data that Canada's public pension plans have had no visible effect on household savings behaviour. This paper presents some cross-sectional evidence on the response of personal saving to public pensions, which appears to conflict with the Boyle and Murray findings. It is organized as follows: Section I describes the methodology and the data base used; the empirical results are analysed in Section II; some conclusions follow in Section III.

The Impact of Public Pensions on Personal Retirement Saving in Canada: Some Evidence from Cross-Section Data

During recent years much attention has been focused on the question of whether or not public retirement income systems have an adverse on personal saving. The concern has been expressed in a number of countries that if there is any reduction in saving, it could result in a lower rate of capital accumulation and, as a consequence, slower productivity growth. Unfortunately, the, theoretical literature on the subject is inconclusive. Within the framework of a life-cycle model where saving and retirement decisions are made jointly, the overall of public pensions is ambiguous, depending on the relative strengths of the wealth replacement effect and the induced retirement effect [9; 10]. The former reduces saving while the latter tends to increase it. The issue is further complicated by the possibility that individuals might attempt to vitiate what the public pension system does through offsetting changes in private intergenerational transfers in the form of bequests [1; 14]. It would appear, therefore, that only empirical evidence can determine the extent to which public pensions affect personal saving. Whereas in the United States a great deal of research, much of it with conflicting results,' has been devoted to shedding further light on this very important issue, in Canada the subject has been somewhat neglected. What little evidence there is, however, lends little support to the popular view that public pension programs such as Old Age Security (OAS) and the Canada Pension Plan (CPP) have had a negative on saving. Boyle and Murray, in their recent study, conclude from time series regressions that Canada's public pension plans have had no visible on household savings behaviour [2,467].

Inflation, Tight Money and Household Saving Behavior: Finnish Evidence

The hypothesis, put forward by Deaton in particular, that real income and price innovations have a positive effect on the savings ratio is tested. As points of reference, two models are used in which consumers' uncertainty about relative prices in a cross-section and an intertemporal sense, respectively, plays a major role. In completing the models, a tight money variable is also introduced as a factor which affects the savings ratio. Evidence from Finnish quarterly data for the period 1966-1979 provides strong support for this hypothesis. Results are relatively robust with respect to alternative proxies for real income and price innovations as well as to alternative specifications of the tight money variable.

Rural Household Savings Behavior in South Korea, 1962–76

AbstractThis study documents the extent of savings in representative rural households in South Korea during 1962–76. A technique for measuring permanent income from cross‐section data is used to estimate marginal savings behavior. The results show that households saved a remarkably large part of their incomes. During the late 1960s these savings were, on the margin, about one‐fifth of permanent incomes and about four‐fifths of transitory incomes. Authors also conclude that useful measures of permanent and transitory income can be estimated from cross‐section data.

The Personal Savings Function of Urban Worker Households in Japan

SINCE the end of World War II, the Japanese economy has attained a rapid economic growth, and the necessary capital funds have been procured through personal savings rather than through forced savings via taxes or inflation. One of the remarkable phenomena is the more or less steady rise in the personal savings ratio, particularly in urban worker households. The savings ratio of urban workers rose from 2.0% in 1951 to 19% in the 1960s. Contrary to the expectation that the savings ratio in urban worker households would be stabilized, it kept increasing in the 1970s and reached 24% in 1974. This rate of 24% in 1974 is much higher than those of the other OECD countries, which range from England's 8% to West Germany's 15%. A puz'zling phenomenon in the 1970s is that the savings ratio increased as inflationary pressure mounted. After the oil crisis of 1973, for example, the savings ratio jumped by 1.7 points in 1974 under double digit inflation. Why has the savings ratio continued to increase? Does a conventional savings function explain it? Answers to these questions have serious implications for macroeconomic policies since if the high savings ratio is sustained when the Japanese economy enters a period of slower growth, one might observe excess liquidity. Furthermore, if it is found that the savings ratio is positively correlated with inflation rates, then personal income tax cuts to stimulate sagging consumption may lose effectiveness if the inflation rate is not controlled. The present paper attempts to answer the following two questions: (1) does a conventional savings function explain the urban worker household's savings behavior in the sixties and seventies? and (2) if not, what would explain the puzzling rise of personal savings ratio in the seventies? Attempts to explain Japanese savings (or consumption) have been numerous: Blumenthal (1970), Shinohara (1959, 1962, 1970a,b), Komiya (1966), Mizoguchi (1970), Noda (1970) and Yoshihara (1972), among others, have attempted analyses. Many of these studies applied the conventional consumption functions of the relative income, permanent income and life-cycle hypotheses. Among the various studies we first examine Shinohara's savings function. We apply two tests: a Bayesian test of parameter shift, and an ex post forecasting test. The Bayesian shift test was applied after the Chow test failed mainly due to the fact that one of the crucial assumptions necessary to conduct the Chow test does not seem to hold for our data. In contrast to previous studies, a recent study by Sato (1976) argues that the savings behavior of urban worker households reflects the endogenous socio-economic motivations to save. To answer question (2) above, therefore, we sharpen Sato' s formulation to explicitly introduce those variables that reflect socio-economic motivations for savings. The organization of the paper is as follows: in section II, after a brief survey of some studies of the Japanese savings function, we examine the validity of Shinohara's formulation in the sixties and in the seventies by the Chow test and a Bayesian test of parameter shift. In addition to Shinohara's formulation we shall examine the applicability of a Houthakker-Taylor (1970) type dynamic savings function and compare it to Swamy' s (1968) application to international data (one of the countries studied there is Japan). In section III, Sato's formulation (1976) is modified and estimated using time series as well as cross section data. The modified Sato formulation is compared to the Houthakker-Taylor formulation. Section IV gives concluding remarks and possible policy implications of the findings. Received for publication July 7, 1977. Revision accepted for publication March 22, 1978. * University of Pennsylvania. I am grateful to Professor Hiroki Tsurumi of Rutgers College for suggestions and encouragement, and also to anonymous referees of this REVIEW whose comments improved the paper. Responsibility for any remaining error is of course mine.

The role of sources of income and investment opportunities in rural savings

This paper investigates the effect that sources of income and investment opportunities have on the savings behavior of farm households in rural India. The panel nature of the data (agricultural years 1968–1969, 1969–1970 and 1970–1971) allows for the identification of the permanent and transitory components of a household's income. It is shown that income variability (rather than investment opportunities) can account for observed differences in the propensity to save out of different sources (agricultural/non-agricultural). A direct test of the effect of investment opportunities on savings is offered in the second part of the paper. It is observed that capital market conditions have an important effect on this relationship; poor households save more, and rich households save less, in response to an increase in investment opportunities.

Soviet Household Saving Behavior

A LTHOUGH there are many differences I between planned and market economies, both with respect to the locus of decisionmaking power and the institutions designed to allocate resoturces, household behavior in the two economies may be quite similar. Both Soviet and Western households determine the allocation of their time between work and leisure in response to their preferences and the real wage. Although the Soviet worker does have a limited ability to choose the number of hours he works in his primary place of employment, he can choose to increase or decrease his work effort in response to bonus schemes. He may also get a second job or allocate some time to quasi-legal, free-market activities. Once this choice is made, each household has a certain money income that it may devote to present consumption or save for future consumption. Making the assumption that Soviet households, like their Western counterparts, wish to maximize the utility derived from consumption over their lifetime, we may observe them transferring income from the present to the future, or in the reverse direction, depending upon their present and expected future money income, the current and expected future price of commodities, the interest rate, and their rate of time preference, restricted, of course, by the limited availability of consumer credit. Although the motives for saving may be similar for Soviet and Western households, the significance of saving behavior in the two contexts is quite different. A main concern of those investigating saving behavior in developed market economies has been the relationship between aggregate demand and the level of output and employment. The investigation of saving behavior in developing market economies focuses on the need for increased savings in the household sector to finance ambitious investment programs.1 In the Soviet Union the significance of household saving behavior is different from the two cases above. The resources for the planned level of investment are determined by the central planners independently of household saving decisions, and the remainder of the resources, after subtracting such items as defense and the costs of government administration, are made available for the production of public and private consumer goods. A sales tax on consumer goods is set by the planners to equate the supply of, and demand for, these goods. Thus, in theory the saving decisions of Soviet households do not influence either the total level of output or the share of output devoted to consumption and investment. The above analysis of the Soviet economy, however, is an oversimplification and ignores the impact that Soviet household saving behavior can have on the outcome of the plan. If households are saving at their desired rate, but this rate is greater than anticipated by the planners, a part of the planned output of consumer goods will not be sold and unplanned increases in inventories will result, given that prices are not responsive to excess supply. Assuming the planned level of inventories is considered optimal, these unplanned inventory increases represent a waste of resources, and when they occur they are, and ought to be, of considerable concern to Soviet planners. On the other hand, if money wages are rising rapidly and households find that they are saving at a rate faster than desired, they will attempt to buy more goods and services with the excess savings. To the extent that prices and the supply of consumer goods are completely determined by the planners, and both are unresponsive to consumer demand, households will be unsuccessful in their attempt to purchase goods and to reduce their saving rate, and may choose to reduce their work effort instead. In fact, Soviet planners do not completely determine the price and supply of consumer Received for publication September 30, 1974. Revision accepted for publication June 9, 1975. 1 There is a substantial literature on the effect of rising incomes on savings in developing economies. For a survey of this literature see Mikesell and Zinser (1973).

Econometric studies of household saving behaviour in developing countries: A survey

This article surveys recent attempts to measure and analyze household savings behaviour in developing economies. Studies of the relationships between savings and current income, permanent income, wealth, interest rates, the price level, household demographic characteristics, occupation, income distribution, direct taxation, and other factors are reviewed and evaluated.

On Some Determinants of Rural and Urban Household Saving Behaviour*

On Some Determinants of Rural and Urban Household Saving Behaviour*

Household Saving Behavior in the Developing Economies: The Indonesian Case

Econometric research on the determinants of household saving based on micro data drawn from the less developed countries has lagged far behind the pace set in advanced nations. It would appear that there has been limited hypothesis-testing in the LDC's beyond macro formulations of the consumption function. Furthermore, very little of the development literature attempts to isolate the impact of structural change on aggregate personal saving, since few studies provide meaningful disaggregation. This state of affairs seems paradoxical, given the currency of W. A. Lewis's remark that the central problem in development theory is to explain an increase in domestic saving from 4 or 5 percent of national income to 12 or 15 percent.1 The dearth of empirical evidence on household saving appears all the more peculiar, given the current emphasis which marginal savings rates enjoy in a flourishing crop of growth models. Most of these ignore the sectoral components of savings, with their divergent behavior, and concentrate instead on aggregate savings performance. Per capita income, which is introduced as the independent variable, is required (a) to capture virtually all of the distributional changes underlying the growth process, and (b) to capture changes in other variables which have a significant impact on savings behavior, whether of households, corporations, or governments. The recent, and highly aggregative, Chenery-Strout model is just one example ;2 most growth models make aggregate domestic savings a simple function of per capita income, either current or lagged.3 On the one hand, this approach may yield simple, well behaved models and reasonably useful short-run forecasts. On the other hand, it offers only limited insight into the development process and contributes little to the policymaker who seeks to understand the savings decision and how he might act upon it. Furthermore, household saving is usually left in the background, while the government and corporate sector receive attention as the major contributors to high marginal saving rates. This state of affairs, if we have described it fairly, certainly cannot be